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*Exercise 8-11 Culver Companys record of transactions for the month of April was as follows. Purchases April 1 (balance on h

Assuming that perpetual inventory records are kept in dollars, determine the inventory using (1) FIFO and (2) LIFO. (Round an

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Answer #1

1.

Average cost per unit
Qty(i) Rate(ii) Amount(iii=i*ii)
1-Apr 750 5                 3,750.00
4-Apr 1875 5.07                 9,506.25
8-Apr 1000 5.36                 5,360.00
13-Apr 1500 5.56                 8,340.00
21-Apr 875 5.66                 4,952.50
29-Apr 625 5.86                 3,662.50
Total 6625              35,571.25
Average cost= Total Amount/ Total Qty
35571.25/6625
                 5.37
Inventory Purchased Goods sold
Qty(i) Rate(ii) Amount(iii=i*ii) Qty(i) Rate(ii) Amount(iii=i*ii)
1-Apr 750 5                 3,750.00 3-Apr 625 11 6875
4-Apr 1875 5.07                 9,506.25 9-Apr 1750 11 19250
8-Apr 1000 5.36                 5,360.00 11-Apr 750 12 9000
13-Apr 1500 5.56                 8,340.00 23-Apr 1500 12 18000
21-Apr 875 5.66                 4,952.50 27-Apr 1125 13 14625
29-Apr 625 5.86                 3,662.50 5750 67750
Total 6625              35,571.25
Closing Inventory Rate Amount
LIFO 6625-5750=875 1-Apr 750 5              3,750.00
875-750=125 4-Apr 125 5.07                 633.75
             4,383.75
As per LIFO          4,383.75
Average 6625-5750=875
Average cost per unit=5.37
Closing Inventory=875*5.37=4698.75
         4,698.75
Inventory Purchased Goods sold
Qty(i) Rate(ii) Amount(iii=i*ii) Qty(i) Rate(ii) Amount(iii=i*ii)
1-Apr 750 5                 3,750.00 3-Apr 625 11 6875
4-Apr 1875 5.07                 9,506.25 9-Apr 1750 11 19250
8-Apr 1000 5.36                 5,360.00 11-Apr 750 12 9000
13-Apr 1500 5.56                 8,340.00 23-Apr 1500 12 18000
21-Apr 875 5.66                 4,952.50 27-Apr 1125 13 14625
29-Apr 625 5.86                 3,662.50 5750 67750
Total 6625              35,571.25
Closing Inventory Rate Amount
LIFO 6625-5750=875 29-Apr 750 5              3,750.00
875-750=125 21-Apr 125 5.07                 633.75
             4,383.75
As per FIFO          4,383.75
Closing Inventory Rate Amount
FIFO 6625-5750=875 29-Apr 625 5.86              3,662.50
875-625=250 21-Apr 250 5.66              1,415.00
             5,077.50
As per LIFO          5,077.50
COGS= Opening Inventory+Purchase- Closing Inventory
As per FIFO
Opening Inventory          3,750.00
Closing Inventory          5,077.50
Purchases       31,821.25
3750+31821.25-5077.50=30,493.75
      30,493.75

In an inflationary period FIFO method will show the highest net income since the value of closing inventory is highest (5,077.50) in this method, leading to increase in net profit.

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